The Dollar Times » Taxhttp://www.thedollartimes.com
Financial planing|stock market |Credit Cards|News and Analysis|Small Businesses|Insurance,Sun, 02 Aug 2015 12:44:42 +0000en-UShourly1http://wordpress.org/?v=4.1.6Income Splitting by High Income Professionalshttp://www.thedollartimes.com/news-and-analysis/income-splitting-by-high-income-professionals-5832.html
http://www.thedollartimes.com/news-and-analysis/income-splitting-by-high-income-professionals-5832.html#commentsSun, 31 May 2015 14:13:50 +0000http://www.thedollartimes.com/?p=583231st May: High Income professionals of Canada have been getting huge tax benefits for decades by income splitting.

Yes, this has been proved by a recent study undertaken by top researchers of Canada.

Income splitting by high earning professionals—High income professionals in Canada have been successful in getting big tax benefits by income splitting with their spouses. This has been affirmed by a recent study by Canada researchers.

As per a latest academic research by Professor Michael Wolfson, a top Canada researcher, there has been discussions on the new program of Ottawa enabling income splitting for young couples having children.

Meanwhile, income splitting has been used for years together by high earning professionals including lawyers and physicians. Such high earning professionals have been able to increase their income through private organizations. People can transfer their income to their lower-earning spouses for reduction of their income taxes.

As per the latest report, government has been losing millions of dollars annually in terms of revenue from steps used by private firm owners for shifting their income to their lower-earning income spouses as well as children(adult children) living at the same address.

CCPCs for reducing taxable income—People in very high income brackets create CCPCs(Canadian Controlled Private Corporations) for holding a private business. So, for the last few decades, lawyers and doctors among high earning professionals have been involved in creation of CCPCs for reducing their taxable income.

And a noticeable point in this regard is that payment is made by the firm either as dividend or as salaries to family members in lower tax bracket for splitting income from the private firms.

No wonder, there has been an increase of CCPCs owned by physicians in Ontario to 16,000 in 2011 from 2,000 in the year 2005.

Why income splitting with a spouse?—Net income as well as taxable income can be reduced to a great extent by splitting income with one’s spouse. This is especially true for a higher income taxpayer.

Let us see some advantages of income splitting with a spouse(by a higher earning professional)—

It reduces the marginal tax rate of the taxpayer;

It eliminates or reduced the OAS clawback;

Creation of a pension tax credit for the spouse through pension splitting.

It needs to be notable that income splitting is not going to be of any benefit in terms of reduced marginal rate of tax in case both spouses fall in the same tax bracket. Nonetheless, it pension splitting increases or creates a pension tax credit for the spouse, then it is useful.

]]>http://www.thedollartimes.com/news-and-analysis/income-splitting-by-high-income-professionals-5832.html/feed/0CRA Tracking Unreported Incomehttp://www.thedollartimes.com/insurance/cra-tracking-unreported-income-5808.html
http://www.thedollartimes.com/insurance/cra-tracking-unreported-income-5808.html#commentsSun, 24 May 2015 16:28:38 +0000http://www.thedollartimes.com/?p=5808The CRA has taken note of the increase in the practice of un-reporting one’s income. Many do it unintentionally as they are unaware of what is considered as income. But there are others who do it intentionally.

For those who do not know what constitutes an income, the CRA has a list:

Income from property such as rental income including income from rooms inside the house, property sale income except for the primary residence and income from sales of shares in a corporation.

Income from business profits and interest on income

Overseas Income
Canadian taxpayers are expected to report all income earned, irrespective of the source of income. Income received from overseas sources or from online works should also be reported. A Canadian resident who has business in another country should reveal his income in Canada. Income derived from rent or other similar income and is received in Canada should also be duly reported.

If the income generated in a foreign country is taxed in that country itself then the Canadian resident is exempted from paying tax in Canada. If the country in which the income is generated has a tax treaty with Canada then the taxpayer may be taxed in a subsidized rate. But an input from an expert is needed to ascertain such details.

Non-taxed Incomes
The CRA also has a list of income sources that are not taxed:

Most gifts or inheritances

Child benefit tax credits

Compensations received for accidents or other criminal acts

War injury related compensations

Life Insurance policy payoffs upon the insured person’s death.

But the interest generated on the amount received through any of the above ways can be taxed – and not the amount itself.

Reporting Unreported Income
A Taxpayer is expected to be aware of all the taxable income and to report it in due time. But if there has been any discrepancy then the CRA has provided options to rectify the mistake. If the unreported income is for the previous year then the taxpayer need to file a T1ADJ. Interests and other penalties would be counted from the day it was due. The taxpayer can use the Voluntary Disclosure option if the unreported income is more than a year old.

A Taxpayer Relief Application can be filed to reduce the amount of interest or penalty. The CRA may or may not choose to erase the arrears. But once they decide to investigate an account then the taxpayer cannot file a Voluntary Disclosure.

Penalty of non-filing
Taxes that are not filed on time are penalized for late filing. The first time offence attracts a penalty of 5%, while a 2nd time offence attracts a 10% penalty. In certain cases the CRA can charge the erring taxpayer with upto one year imprisonment for each conviction.

]]>http://www.thedollartimes.com/insurance/cra-tracking-unreported-income-5808.html/feed/0Learning from Common Tax Filing Mistakeshttp://www.thedollartimes.com/investments/learning-from-common-tax-filing-mistakes-5773.html
http://www.thedollartimes.com/investments/learning-from-common-tax-filing-mistakes-5773.html#commentsSat, 02 May 2015 05:55:12 +0000http://www.thedollartimes.com/?p=57732nd May: Are you a bad tax planner when it comes to tax filing?

If yes, then here is a guide to know how can we learn from our tax filing mistakes in the coming times.

Common tax filing blunders--Lets see some examples of tax filing blunders here and how to avoid these in the future.

Examples of bad tax filing could be mistakes on your tax filing form leading to getting late in filing your taxes, waiting too long to begin the process of filing your tax return. All such things mean an unpleasant tax filing experience for you.

You may make some computation errors while filing your tax return. This could be when you figure your taxable income and estimated tax payments.

Bad mathematics could be yet another common mistake with regard to filing tax return.

If you have opted for a direct deposit of your tax refund into your multiple bank accounts, it is possible that you may have entered some number incorrectly. And this could simply mean loss of your entire tax refund.

Was there any side job this year? Well, in such a case, you need to fill a Form 1099-MISC providing details about the extra earnings. And for showing investment and savings accounts, you need to fill 1099-INT and Form 1099 DIV statements. Any mistake in forgetting to report such earnings on your tax return could spell disaster for you.

Steps to avoid tax filing mistakes—

Organize—First of all, it is really important that you make sure to organize all the relevant information pertaining to tax filing. This includes important documents of the financial year. Never allow important documents to pile up.

Reducing AGI—Want to reduce your taxes? Focus on reducing your AGI(Adjusted Gross Income) since your taxes are based on your AGI. Moreover they also have a direct impact on various deductions. You can reduce your AGI by making maximum contributions to 401(k) plans as well as other job-based retirement plans. You will be happy to find that your retirement funds go up while your money becomes tax-deferred.

Itemizing deductions—Take time to itemize your deductions. Do this early in the year to find which receipts can be saved. And you need to notice the tax credits mentioned on the same page. Find whether you are going to qualify for any of such tax credits in the next year. Give preference to tax credits over deductions since these make direct deductions from your tax bill.

]]>http://www.thedollartimes.com/investments/learning-from-common-tax-filing-mistakes-5773.html/feed/0Guide For Canadian Immigrants: Purchasing Propertyhttp://www.thedollartimes.com/investments/guide-for-canadian-immigrants-purchasing-property-purchasing-property-5278.html
http://www.thedollartimes.com/investments/guide-for-canadian-immigrants-purchasing-property-purchasing-property-5278.html#commentsThu, 16 Oct 2014 13:36:39 +0000http://www.thedollartimes.com/?p=5278You are taking a very important decision when you are planning to buy a property in a foreign country. Rules and regulations governing the purchase of property in a foreign country may be very different from what they are in Canada. In Mexico, you are only allowed to buy land alongside borders and coastal regions and that too after getting the required permit from the authorities. You need to remain aware of the problems pertaining to property rights in a foreign country when buying a property.

It is better to live on rent for a while before you take the decision to buy a property. Study the rules and regulations governing buying of the estate. Do not become allured by false promises such as access to a beach. You can get help and advice from travel.gc.ca/advice to know if there are frauds pertaining to property selling and buying in the country you are living.

Hire the services of an approved estate agent to represent you when buying a property. It is better to consult an estate attorney from Canada who is aware of the estate laws of your country. Sign on a document only when it has been studied by your lawyer. If any dispute arises later on, you cannot expect help from Canadian government as its jurisdiction belongs to the local courts only.

Always prepare a will so as to avoid any dispute among your heirs pertaining to ownership rights after your death.

Did you know that you are prohibited from offering a bribe to an official to get undue advantage in your favor while living in a foreign country? Under the Corruption of Foreign Public Officials Act, you can be prosecuted and imprisoned for up to 5 years if it is proved that you bribed a public official to get an unfair advantage.

Real estate agents in many foreign countries are not regulated by laws governing conflict of interest. They can sell a property to you in which they have an undisclosed interest and you cannot do much against them if they happen to be respectable and popular members of community of brokers and agents.

If you are living in a foreign country for a long time, you may be interested in obtaining the legal status of a permanent resident or a citizen. However, you must exercise caution before moving ahead in this direction as you may become ineligible to obtain help and assistance from officials in Canadian embassies and consulates.

For details about the implications of dual citizenship, go through Dual Citizenship: What You Need to Know.

Much after you have filed your returns for the year, you realize that there were a few expenses that you forgot to include your return. Now, you are having sleepless nights because you don’t want to miss upon the advantages. Here, you would certainly like to adjust your returns so that you don’t let go the benefits that you can draw from tax law of the country.

What should you do?

Never hurry up with things, make sure your move ahead with any of your plans only when you have received “Notice of Assessment” from CRA.

Having received this, you have two options: you can either meet up the entire process on a hard copy or can also go online.

If you prefer to do it online, then move to My Account option where you need to choose “Change my return” option. This would certainly be available on the website of CRA.

If you prefer to take up the process through hard copy then fill up Form T1 Adjustment Request and submit with CRA.

You also have the option of writing a letter to tax centre stating the required information. You must provide the documents supporting your request.

How much can you move back?

If you under the impression that you can claim deductions for the last as many years as you wish to, then you really need to change your thought process.

CRA will let you move back for three years from the current year and not beyond that.

However, it depends on sole discretion of CRA to allow you to claim deductions for period back than this.

Is there a need of supportive documents?

In one such case, a flower vendor was allowed to claim deductions for the returns he field for 2004 and 2005. He informed the Agency about writing his income incorrectly where there was a miss by a zero and hence it affected the entire income figure.

The Agency asked him to provide supportive documents to prove his point. He could not do so on the grounds of “theft” which left him with little scope to get any further refund from CRA. CRA denied his appeal and the same was even denied by the Court because he could not support his argument with required documents.

Can there be a penalty for demanding falsified “Adjustment?”

Yes there can be, if you apply for “Adjustment” and are not able to support it with true documents or trying to submit false documents then you should not. If CRA understand that you have been trying to make money out of deductions and refunds you will be levied a huge penalty. In one such case an individual has been levied with big penalties which he appealed against. But, even here, he could not get any mileage as his case wasn’t true and had no base at all.

Asking for adjustment is not a wrong concept but only when you are genuine with it. If caught by CRA for minting money through this source there could be serious consequences.

FBI and U.S. Attorney catch upon yet another case of money laundering and tax evasion by some Canadians.

The Background

The case involves two Canadian Citizens who played a major role in laundering money offshore amounting to a sum of $500 million. The prosecutors of the case in US have informed that the charges framed are of money laundering and tax evasion as well.

However, the case involves an American citizen in the name of Robert Band field as well along with these two gentlemen by the name of Brian De Wit and Cam Can. There are others involved in the case along with the people mentioned above.

Charges framed

The charges are of:

Committing securities fraud

Tax fraud and

Money laundering

The fraudulent operation

The fraudsters reportedly set up sham companies, breaking the law of US, which was purely based on lies. They encouraged people to disclose their security details and break the tax laws of the country.

The shares of those companies have been transacted which actually have stopped being traded.

They trapped the clients by giving them high hopes and talking too much about their companies which never had an existence. One such company was in the name of Unicorn International Securities based at Belize. The website of this company suggested that one could evade taxes and the name of any such client would remain hidden from any of the authorities.

They went down to the level of cheating upon legitimate investors who put their money into stocks. They did not stop at this step rather they went ahead with their ill intentions and helped their corrupt clients in tax evasion too. The entire scam amounted to a sum of $500.

They did all this by projecting as many as 100 names as their clients who had no real existence.

The fraudsters uploaded the money on pre paid debit and credit cards so that it can be sued at US in a legalized way.

Involvement of Canadian clients

According to information given to CBC News the entire scam includes clients both from Canada and US and hence there is strong base to conclude that there are Canadians utilizing their services.

Therefore the authorities are trying to get in touch with their Canadian counterparts so that they can trace the root of the issue.

Catching the fraudsters

US authorities are seeking extradition of both the gentlemen from Canada. They believe that they are present on Canadian soil and hence the authorities need help from their counterparts here.

US and Canada both have tough laws to deal with anyone trying to evade taxes and eye wash the Government. A group of people have been trying to do so by deceiving many a people in both US and Canada. Lawmakers would deal with them in a strict manner so that such cases are stopped form occurring again. Immense support is needed by Canada for US to deal with the frauds.

Those who are found to be tax offenders could experience a range of punishments starting from fighting a trial to being jailed up. Canada is quite strict with those who do not pay their taxes accurately and on time.

How will Canada Revenue Agency catch upon?

Those who think that they don’t pay their taxes, miss the deadline and can go unnoticed should take a note. CRA can reach any and every individual who avoids paying taxes or even if pays, never does it with the right amount of payment one is supposed to make.

CRA can always make a notional assessment and can ask you to submit every possible detail of your income, if they want to do so.

They may proceed ahead with such a step if they find you to be suspicious or even if they don’t find you to be one.

They can catch up string even from your suppliers or from any other source that is interlinked with you.

Will a tax evader be jailed?

There are quite a large number of people who are in jail when being caught upon for evading taxes. However, before a person is sent to jail, eh is given enough options by the Government and CRA to clear of the dues along with penalty and avoid any stricter action.

When it does not seem to be getting complied, they are to face a trial rather fight a case against the charges slammed and then finally when CRA is not able to recover the dues from them, they are put behind the bars. And for those who intentionally don’t make the payment, it becomes an obvious fortune.

Is there a change in plan?

In 2015 the number of people going to jail for evading taxes may go even further down if CRA implements the concept of reducing the number of auditors.

But, the possibility of being jailed does not become zero for acts like submitting a false statement of income and expenses, not maintain or displaying the log books and any attempt of wilfully not paying the taxes.

What is the number of people being jailed?

In 2013 only 15 people were jailed for tax offences. However, anyone involved with the usage of Electronic suspension of Sales Software (ESS) would face an imprisonment of up to five years.

What should the genuine lot do?

Those who are genuine about paying taxes and have got delayed or paid a wrong amount of tax, must get back to CRA for making a voluntary disclosure and ensure that all your dues are clear with penalty. Even if you can’t pay the full amount you can think of paying a smaller portion of your dues and assure CRA that you down intend to avoid paying taxes.

Tax Avoidance will never be encouraged bay any country because it is the only source to generate national revenue. Those who don’t pay taxes intentionally should be prepared to see a stage where they may be jailed for not complying with the laws.

]]>http://www.thedollartimes.com/news-and-analysis/tax-offence-would-it-mean-going-to-jail-5112.html/feed/0Myths about tax returns: Could be misleading for the filershttp://www.thedollartimes.com/news-and-analysis/myths-about-tax-returns-could-be-misleading-for-the-filers-5004.html
http://www.thedollartimes.com/news-and-analysis/myths-about-tax-returns-could-be-misleading-for-the-filers-5004.html#commentsWed, 30 Jul 2014 16:55:44 +0000http://www.thedollartimes.com/?p=5004

Tax myths

Tax filers would certainly like to avoid paying taxes to the extent they can, they would keep looking for ways that could save them a little money from one corner or the other.

While on the journey of filing returns and avoiding some, they may get caught into myths that could be misleading, rather dangerous for them.

Let’s learn some of the myths and the associated realities:

Someone paying provincial taxes need not pay federal ones: This myth could lead you to a big trouble. One has to pay taxes applied by both provincial government and even federal government.

It is not mandatory to stick to deadlines: No matter how big your problem is, you have to file returns on time. In case you are not able to make the full payment on time, you have the provision of making a part payment and clear the rest later. But, you will have to do all this within a time limit otherwise you will have to face penalty which could come in the form of imprisonment or even huge fine.

You can get away from the officials hand: No matter how hard you try to skip and eyewash the officials you will not be able to come out of their hands. They have been dealing with quite stubborn tax payers and have realized money from anyone who is supposed to pay the Department. They will never spare you even if you act funny to the core.

Tax laws can be changed for specific people: They cannot be, they will remain the same for everyone who is liable to pay taxes.

Your file will be accept without being questioned: CRA will scrutinize your file and see if there is any discrepancy between what you have paid and what you are actually supposed to pay. Seeing this, there will be a notice to which you have to respond. You can never avoid all this because CRA is methodical and particular about realizing taxes.

Getting a hike would not increase tax burden: it certainly would. But, that doesn’t mean that you would not accept any hike. The income that crosses the lower limit would be taxed according to the next higher limit. So even though the tax burden will go up a little, you can enjoy the hike.

One can skip the eyes of CRA authorities by filing returns online: You really cannot do this, because you’re supposed to submit hard copies of all the supporting documents to prove your point. Also, the scrutiny is done randomly so your one can erupt from anywhere and you may be grilled to prove your point.

Getting caught into any kind of myth should be the last resort opted for. Officials are smart and learned people. They have been handling filers for years and they know where to put their finger exactly on. You should rather get prepared to be prompt and particular with your papers instead of adopting any malpractice.

The tax rule says that taxes are to be paid for the person who has died, though the payment will be made for the year in which the death has occurred.

Who is responsible to file returns?

The liquidator or executor or administrator of the estate is supposed to make the payment on behalf of the person who has died off.

If there is no specific name mentioned then the survivor can file returns.

The widow or widower can also file a joint return and clear out the tax dues.

Can the deductions be claimed?

Yes, they can be. When the widow or widower is filing a joint return he or she can awls claim for both his and her own personal exemptions and for that of the dead spouse’s too.

Who will sign the return?

The administrator if filing a return should duly signed it, along with the spouse. If the files are returned only by the spouse then he or she can also sign it.

Is there a separate deadline for filing returns?

No, it is the same as what it is for any other citizen of the country. This means that the returns should be filed by April 15. The rest of the process remains the same as any other tax filer.

What all should be included in the return?

All income made by died person would be included. Which will also include the net capital gain, all capital property, and any kind of capital losses? Grossly it can be said that both investment income and employment income should be mentioned while filing returns.

What are the other things that should be looked into?

The survivors must make it a point to deregister the person from Registered Retirement Savings Plan or registered Retirement Income Funds immediately after death. And this should be including in the file return which is prepared for deceased person.

However, RRSP or RRIF can be transferred to surviving spouse or children who are financially dependent without them having to pay any taxes.

What happens to income earned?

The income earned after death should be mentioned in either a trust return or in the return of beneficiary.

Canada Pension Plan and Old Age Security payments are dispensed till the month in which the person died. However, this has to be mentioned while filing returns.

What if there is scope of getting a refund?

The surviving spouse would automatically get because in case there is a possibility that this person would file returns jointly following the tax brackets their income falls under.

Dead people are also are liable to pay taxes at least for the year they remained alive for some time and then died off. And generally this income is calculated and observed to be the highest one because it is the final calculation. Every single income, loss and gain is to be mentioned in this file and one can claim deductions as per the tax rules as well.

Canada Revenue Agency has always been trying to catch tax cheats belonging to various income groups and strata of the society. It would not be fair to quote that tax cheats belong to upper strata of the society only but, it is fact that even people belonging to middle income group too cheat taxes.

Though there are number of ways adopted by CRA to catch upon these people, but, there is a significant role played by those who help the department to reach these cheats and evaders.

CRA has set large sum of money for these helpers as they are observed as responsible citizens of the country.

The cash reward

Those Canadians who would help CRA to catch upon tax evaders and especially those who are internationals tax evaders would get a reward of 15% on the money recovered in these cases.

However, this money would only be awarded if the cheats are caught, the cases are proved and the money is recovered from them.

Once a case like this is informed to CRA, there has to be a case and as series of steps would be met by the Agency. The accused will also paly a defensive game and try to either prove that he is not guilty or he may fight a case to prove that the amount claimed is more.

A reporter has to wait all this while, in fact till the last step of the process when the evasion case is proved against a cheat.

The steps to be met by the helpers

Those helping to catch upon these evaders should keep a few things in mind. They should ensure that they provide CRA with certain basic information about the evader. This could include the name, address and a rough estimate of the amount evaded.

They should also try and submit some document as proof of their claim. It would be a big help for CRA if these people can provide the information on social security number or personal identification number of the tax cheat.

The ultimate aim

There has been a deficit in the generation of revenue. Hence Government aims at compensating this deficit by taking strict measures in ensuring that people pay taxes on time and the correct amount.

The aim is to generate as much as %6.7 billion revenue by adopting various measures on tax front. This aim would be met over the period of next six years and would be in the form of closing loopholes in tax system and making the process even more fair and firm.

Tax evasion and tax cheat are common phenomena in the country which have been bringing down the revenue, thus disabling the Government to provide the public facilities adequately. Therefore, CRA is all set to introduce tighter rules and stricter norms to ensure that cheats are not let to go away. For this even common people can also be of help, and those who would join in the process genuinely will be tipped off in the form of a cash reward.